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European Fintech Regulation

An overview

18 July 2019

The use of technology to deliver, enhance or “disrupt” financial services is transforming the sector. Whether you are an institution upgrading the existing financial services that you offer, a new entrant launching a groundbreaking product, or a regulator or an industry body considering whether the current regime is fit for purpose, this overview, produced in cooperation with Kromann Reumert and Arthur Cox, will help you navigate the complex regulatory framework for fintech products across the EU.

Fintech has the potential to increase efficiency and reduce costs, to improve access to, and delivery of, financial services, to enhance the customer experience and to create markets in new and innovative financial services products. It also poses risks, including money laundering, cyber-security, consumer protection and data privacy. However, despite these risks, financial institutions, regulators and challenger companies believe that fintech – and the opportunities it presents – should be embraced.

Fintech encompasses a wide range of financial services and products that intersect with technology. These include peer-to-peer (or P2P) lending, online payments and foreign exchange services, digital wallets and e-money, automated or robo investment advice, artificial intelligence (AI), big data analytics, blockchain and crypto‑currencies and many more. While these products and services are all different, they all make use of new or developing technology to: provide traditional financial services in a more cost‑effective, accessible and consumer‑friendly way; or facilitate the expansion of new or innovative financial products and services.

The growth of fintech and the expansion of non-financial companies into the heavily regulated financial sector has resulted in a growing need for regulators, the fintech community and the financial services industry to engage fully with developments in this sphere. The vast majority of financial services legislation and regulatory standards predate the rapid advances in technology and consumer demand for innovation. While governments are keen to be seen to be encouraging innovation in a number of jurisdictions, the law has been slower to catch up. Regulators across Europe, including the FCA in the UK, the AMF and ACPR in France, the BaFin in Germany, the CSSF in Luxembourg, the AFM and DNB in the Netherlands, the European Commission and Parliament, the European Central Bank and the European Securities and Markets Authority (ESMA) have, however, publicly announced their support and have launched new regulatory initiatives to encourage innovation in financial services. The latest of these which is likely to have a significant impact is a consultation launched by the EU Commission in March 2017 on technology and its impact on the European financial services sector as part of its consumer financial services action plan. Responses are due in June 2017 and will help the EU Commission develop its policy approach, for example helping to determine whether further harmonisation is appropriate.

In this overview report, which is available for download, we outline the current regulatory framework governing financial services, financial crime and consumer protection applicable to blockchain securities services, robo advice, international FX payments and peer-to-peer lending at an EU level and at a local level across Denmark, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Poland, Spain and the UK. We also look at regulatory innovation initiatives in those jurisdictions.

To download the full overview, please click here.